From a revised 90.5 in May, but slightly better than expectations of 89.5

-UK Q1 Current Account Deficit Stg11.179bn Vs Stg7.228bn Q4

LONDON (MNI) – The UK’s current account deficit widened sharply in
the first quarter, hit by a ballooning trade deficit.

The current account deficit surged to Stg11.179 billion in the
first quarter from a revised Stg7.228 billion in the fourth quarter,
with the total trade deficit widening to Stg7.847 billion from Stg5.554
billion in the fourth quarter.

The data show the UK economy struggling to achieve the hoped for
rebalancing of the trade deficit, with Bank of England Monetary Policy
Committee member Martin Weale suggesting only last Thursday that
sterling may need to fall further to help close it.

“The trade deficit will need to close further and sometimes I do
wonder whether the exchange rate might need to be more competitive than
it is at the moment in order to help with that,” Weale said at a Hart
Brown economic forum.

The UK’s total income balance showed a surplus in Q1 of Stg2.205
billion, down from Stg4.396 billion in Q4. Total current transfers
recorded a Stg5.537 billion deficit, compared with Stg6.07 billion in
Q4.

The capital balance showed a small surplus of Stg952 million, up
from Stg867 million in Q4.

— London newsroom: 44 20 7862 7491; email: drobinson@marketnews.com

[TOPICS: MABDS$,M$B$$$]

Got knocked down to 0.7986 during the stops fest in EUR/USD following comments from the German Govt.

There’s stronger support down at 0.7950/55 (May 15/16 lows/year lows), but pressure so far remaining on the pair with bounces stalling into 0.8000.

EUR/GBP’s sitting around 0.7992

UK DATA: UK Q1 current account deficit Stg11.179bn vs Stg7.228bn Q4

-UK Q1 Final GDP down 0.3% q/q; down 0.2 y/y
-UK Q1 Current account deficit stg11.179bn vs stg7.228bn Q4

LONDON (MNI) – The UK economy contracted 0.3% on the quarter in the
first quarter, hit by plunging construction output.

The final estimate of Q1 growth showed that on the expenditure side
household spending rose 0.5% on the quarter with government expenditure
up 2.8%. The largest downward effect on the output side came from
construction, which saw output plunge 4.9% on the quarter, knocking 0.4
percentage points off growth.

Stripping out the volatile construction component would have left
first quarter growth just in positive territory.

Back revisions showed 2011 GDP was revised up to 0.8% on 2010 from
0.7%, while Q4 growth was revised down to -0.4% from the previous
estimate of -0.3%.

With Q2 growth widely expected to be negative, with output hit by
the extended holdiay over the Jubilee weekend, the UK economy looks set
to continue in technical recession through the first half of this year.

The Q1 data showed industrial production fell 0.5% on the quarter
and made no contribution to quarterly growth, while manufacturing fell
0.3%.

Services output was up 0.2%, adding 0.1 percentage point to
quarterly GDP growth.

–London newsroom: 44 20 7862 7491; email: drobinson@marketnews.com

[TOPICS: MABDS$,M$B$$$,MT$$$$]

UK DATA: Q1 GDP Shows Unrevised 0.3% Fall; Hit By Construction
-UK Q1 Final GDP down 0.3% q/q; down 0.2 y/y
-UK Q1 Current account deficit stg11.179bn vs stg7.228bn Q4
-UK Q1 Services output up 0.2% q/q; up 1.0% y/y
-UK Q1 Manufacturing output dn 0.3% q/q; dn 1.4% y/y
-UK Q1 Industrial production dn 0.5% q/q: dn 3.1% y/y
-UK Q1 Construction output dn 4.9% q/q: dn 4.0% y/y
-UK Q1 Household expenditure up 0.5% q/q; up 2.0% y/y
————————————————————————
The UK economy contracted 0.3% on the quarter in the first quarter,
hit by plunging construction output. The final estimate of Q1 growth
showed that on the expenditure side household spending rose 0.5% on the
quarter with government expenditure up 2.8%. The largest downward effect
on the output side came from construction, which saw output plunge
4.9% on the quarter, knocking 0.4 percentage points off growth.

UK DATA: Q1 FINAL GDP DOWN 0.3% Q/Q; DOWN 0.2 Y/Y

SA Unemployment: +7k (pan-German), +9k (West), -2k (East)

FRANKFURT (MNI) – The ranks of the unemployed in Germany rose for
the third consecutive month in June, and faster than expected, adding to
May’s upwardly-revised increase to hit the highest level of the year,
the Federal Labour Office reported on Thursday.

At the same time, the number of job vacancies continued to decline,
the Labour Office said.

The number of people actively looking for work reached 2.882
million in seasonally-adjusted terms this month compared to May’s 2.875
million, but the jobless rate was unchanged at an upwardly-revised 6.8%.

Expectations had been for a more modest rise of 5,000 in the
jobless number and an unemployment rate of 6.7%, which would have been
unchanged from May’s unrevised figure.

Without adjusting for seasonal trends, the unemployment rate fell
0.1 percentage point to 6.6%, reflecting 2.809 million jobseekers in
June compared to 2.855 million in May.

Job vacancies fell by 4,000 in June, extending the run of declines
to five months. Payroll jobs data, which carry a one-month lag, showed
an increase of 37,000 this month after +30,000 in May.

Positive developments in the labour market continued to underpin
consumer confidence this month, the GfK Group said, but it warned of
negative fallout from the Eurozone debt crisis.

Recent surveys show that companies are already feeling the effects
of the debt crisis. The PMI polls pointed to shrinking order books and
only modest job growth in the private sector in June.

Over the same period, the Ifo institute noted that manufacturers
maintained “defensive” hiring plans, while plans in the service sector
remain only slightly expansionary.

The European Commission’s May sentiment survey did not point to a
reversal of the trend in the near term, as employment expectations in
all major sectors except services eroded and a majority of
manufacturers, retailers and construction firms said they were looking
to cut staff in the next months.

Consumers also revised down their employment outlook in May, though
jobless fears in Germany remained well below the long-run average, the
Commission added.

The Commission’s June sentiment report is due out today at 0900
GMT/0500 ET.

– Frankfurt bureau: +49 69 720 142, email: frankfurt@marketnews.com –

[TOPICS: M$G$$$,MAGDS$,M$X$$$,M$XDS$,MT$$$$]

Expected -0.3% q/q -0.1% y/y, worse on the y/y and confirming a recession

Q1 Current account  -£11.179 bln from -£7.228 bln in Q4 2011 (exp -£9 bln, equiv 2.9% GDP)

BOE comments: Expects mortgages and household loan costs to rise significantly  in Q3, sees sharp fall in  availability of high-loan to value mortgages

The earlier comments from German govt source have helped lower even further expectations for the EU summit.  This has helped pressure EUR/USD which reached a session low 1.2417 after aforementioned sell stops through 1.2440 and 1.2420 were tripped in quick succession.

The weaker than expected German jobs report helped exaccerbate things.

Buy orders clustered 1.2400/10. I’d hazard a guess further sell stops gathered close below there, but no exact levels confirmed at time of writng.

There’s wasn’t too much follow through overnight in Asia after buy stops were triggered up through 0.7950 (o/n high 0.7964) and the NZD/USD’s since slipped back under the 200 day MA at 0.7945 following the earlier mentioned AUD cross sales. 

Some tech support is now seen towards  0.7910/15 (o/n lows), with bids 0.7900/10 below. Sell stops apparently are reported on a break of  yesterday’s lows around 0.7875, with stronger support just below at 0.7845/50

NZD/USD’s currently back down around 0.7912

GERMANY DATA: JUN SA UNEMPLOYMENT +7.0K M/M VS MNI FCAST +5.0K
– GERMANY JUN SA UNEMPLOYMENT RATE 6.8% VS MAY 6.8%
– GERMANY JUN SA UNEMPLOYMENT 2.882 MLN VS MAY 2.875 MLN
– GERMANY JUN NSA UNEMPLOYMENT RATE 6.6% VS MAY 6.7%
– GERMANY JUN NSA UNEMPLOYMENT 2.809 MLN VS MAY 2.855 MLN
– GERMANY JUN SA JOB VACANCIES -4.0K VS MAY -5.0K
– GERMANY MAY SA PAYROLL JOBS +37K VS APR +30K
– See MNI MainWire for details

Slightly worse than median forecast of +5,000.

Adjusted June total  rose to 2.882 mln from Mays’ 2.875 mln.

Unemployment rate steady at 6.8% after May’s number revised up to 6.8% from previous 6.7%.

German labour market head Frank-Juergen Weise stated “there are signs in June of a weaker development on the German labour market”

Low expectations for the summit will have just gone even lower…….

EUR/USD slumps to 1.2475

• The Troika can return to Greece next week, audit likely to take weeks rather than days
• Merkel spoke intensively with Hollande, important preparation work, no details

Up 7 bps on day at 6.99%.

EUR/USD very slightly easier on day, presently at 1.2498.

Timely comment from German government source just hitting the wires

“We would warn against ‘exaggerated panic-mongering’ over the very high interest rates currently for Spain and Italy”

Pillock!!

Slipping back towards 1.0100 with reports of a wave of  good size AUD sales  against various currencies over the last hour or so.   GBP/AUD looks the likely culprit as the cross picks up from 1.5400 to  1.5448 and GBP/USD gets a boost back up through 1.5600 again.

GBP/AUD resistance intially seen up around  1.5450/60  (o/n highs) and  GBP/USD has offers around 1.5610 with large up at 1.5630/50. Support now strengthening around the 100 day MA currently at 1.5401 with the 200 day MA just below at 1.5376

AUD/USD bids sit down at 1.0070/80, but is currently finding some interim support ahead of 1.0100.

PARIS (MNI) – France will hit its public deficit targets this year
and next despite disappointing economic growth projects, Budget Minister
Jerome Cahuzac said late Tuesday.

Most analysts now expect domestic GDP growth of around 0.3% this
year — less than the 0.5% assumed in the campaign program of President
Francois Hollande, Cahuzac observed in a television interview.

“0.2 point less growth will not facilitate the budget process, but
it won’t compromise it to such an extent that the commitments of
[Hollande] will be ignored,” he said. “They won’t be.”

“France will keep its word: 4.5% public deficit in 2012 and 3% in
2013,” he said. “Will it be easy? Certainly not! It will be very
difficult.”

“This shows the need to relaunch growth in Europe,” the minister
argued. “From this viewpoint, the E120 billion [stimulus] package
apparently agreed is good news for me, even if this relaunch clearly
will not come in a few weeks or months or quarters.”

–Paris newsroom +331 4271 5540; Email: ssandelius@marketnews.com.

[TOPICS: MFFBU$,M$F$$$,M$X$$$,MGX$$$,MFX$$$]

“Detailed deal”  on anything unlikely mate

Expectations of anything meaningful coming out of the two day conflab are extremely looooooooow.

• Euro leaders must advance on bank oversight
• Need quick solution on Spain banks
• EFSF, ESM available to help in euro area
• Van Rompuy report weighed toward mutual debt
• Report unclear on how to pool debt
• Germany rejects recapitalisation of banks with bailout funds if supervisory controls stay at national level
• Can’t raise summit expectations too high
• EIB to get 10 bln euros new capital, Germany’s share 1.6 bln
• On the Italy question, Germany is sceptical about developing yet another instrument to solve problems
• It’s up to states with problems to decide whether, when and how to use the available instruments
• We would warn against ‘exaggerated panic-mongering’ over the very high interest rates currently for Spain and Italy
• EU summit cannot decide anything new on Greece before the Troika report out, the country must stick to its obligations

Also sees consumer prices rising 2% in 2012/2013

• Sees 610,000 fewer jobs in 2013 from 2011
• Germany’s economy weakened in 2012 by the EU debt crisis, sees it entering into a “weak phase”

FRANKFURT (MNI) – Spain should examine whether private shareholders
can take a greater role in its bank restructuring program before public
money from the European rescue funds is used, according to European
Central Bank Executive Board member and chief economist Peter Praet.

In an interview with the Financial Times Deutschland published
Thursday, Praet said the first step in Spain’s bank restructuring is for
all banks to make clear exactly how many defaulted loans are on their
books.

“Before public money for recapitalization flows, we should examine
whether private shareholders cannot be drawn in more strongly,” Praet
said. “The Spaniards will then receive their money from the rescue fund
in tranches. Payment will depend on whether Spain has met the
conditions.”

“We will see” whether all E100 billion allotted is needed “or
whether we can manage with less,” he said.

While the program is targeted at Spain’s banks, Praet said one
should “keep an eye” on Spain’s budget developments, given the link
between the sovereign and its banks.

Praet also warned there is currently a risk of the ECB being
“burdened by and pressured into doing things that are actually the role
of fiscal policy.” He said he was “very sceptical” of Italian Prime
Minister Mario Monti’s call for the ECB to offer some guarantees for the
European rescue funds to purchase sovereign bonds.

“We purchased sovereign bonds through our SMP bond-buying program
for monetary policy reasons,” Praet said. “I don’t see any monetary
policy reasons in Monti’s proposal, it would probably not be covered by
our mandate. We would therefore be mixing monetary policy and fiscal
policy in an impermissible manner.”

Praet also backed the view that a Eurozone-wide banking union could
not occur without more steps towards fiscal union and that creating a
banking union would take time as a result.

“A banking union must first make clear what the possible
burden-sharing from taxation looks like,” Praet said. Common deposit
insurance could also come only “when joint risk liability is accompanied
by joint control.”

Praet said it could be “advantageous” for a European banking
regulator to be placed inside or under the purview of the ECB, but that
an external regulator also remained a possibility.

In either case, Praet urged policy-makers to ensure that the
mandates of maintaining price stability and banking regulation were kept
“independent” of one another.

Praet said EU leaders at this week’s summit must commit themselves
to overcoming the “institutional weaknesses” inherent in the Eurozone.

“The markets must be convinced that Eurozone members want to make
monetary union weather-proof in the long run,” he said.

–Frankfurt newsroom: +49-69-720142; email: ccermak@marketnews.com

[TOPICS: MT$$$$,M$X$$$,M$$EC$,MGX$$$,M$$CR$,M$S$$$]